CLARENCE JOHN FALOON V THE COMMISSIONER OF INLAND REVENUE AT WELLINGTON CA748/2013 [2014] NZCA 292

DRAFTCLARENCE JOHN FALOON V THE COMMISSIONER OF INLAND REVENUE AT WELLINGTON CA748/2013 [2014] NZCA 292 [2 July 2014]IN THE COURT OF APPEAL OF NEW ZEALANDCA748/2013CA811/2013[2014] NZCA 292BETWEEN CLARENCE JOHN FALOONApplicantAND THE COMMISSIONER OF INLANDREVENUE AT WELLINGTONRespondentHearing: 23 June 2014Court: Harrison, Wild and French JJCounsel: Applicant in PersonA Goosen and M T Stapleton for RespondentJudgment: 2 July 2014 at 10 amJUDGMENT OF THE COURTA The applications for extensions of time are dismissed.B The appeals are struck out.C The applicant is ordered to pay one set of the respondent's costs as for astandard application for leave to appeal on a Band A basis with usual disbursements.____________________________________________________________________REASONS OF THE COURT(Given by Harrison J)Introduction[1] Clarence Faloon applies for an extension of time to apply for an allocation of a hearing date of his two appeals and to file the cases on appeal.[2] Mr Faloon's appeals are against two unrelated judgments of the High Court in proceedings which he had filed against the Commissioner of Inland Revenue. One was a judgment of Ronald Young J refusing Mr Faloon leave to file an originating application pursuant to s 89M(11) of the Tax Administration Act 1994 foran order granting him further time to reply to the Commissioner's Statement of Position under the tax dispute process.1 The other was a judgment of Katz J ordering Mr Faloon to pay indemnity costs to the Commissioner.2Background[3] Mr Faloon filed his first appeal on 6 November 2013. Security for costs was set at $5,880 which he was bound to pay within 20 days.3 He applied for orders reducing the amount of security and deferring liability for payment. The Commissioner opposed. On 18 December 2013 the Registrar dismissed his application and ordered Mr Faloon to pay security by 7 February 2014. Mr Faloon has failed to comply.[4] Mr Faloon filed his second appeal on 3 December 2013. The date for payment of security for costs expired on 22 January 2014. He did not apply toreview the Registrar's decision and he has since failed to pay security.[5] The last dates for applying for a fixture and filing the cases on appeal for the first and second appeals were 27 February 2014 and 24 March 2014 respectively. Mr Faloon failed to take either step. Unless time was extended, the appeals were to be treated as being abandoned.41 Faloon v Commissioner of Inland Revenue [2013] NZHC 2643.2 Faloon v Commissioner of Inland Revenue [2013] NZHC 2912 [Costs decision].3 Rule 35(3) of the Court of Appeal (Civil) Rules 2005.4 Rules 43(1) and 43(3).[6] However, it is common ground that Mr Faloon applied for extensions within three months after the relevant expiry dates. Thus this Court has a discretion to grant an extension. The Commissioner opposes Mr Faloon's applications because he hasnot advanced cogent grounds for failing to prosecute both appeals diligently, the appeals are without merit and he has failed to pay security for costs.[7] This last ground assumes particular significance. A failure to pay security has two relevant consequences. One is that it prohibits an applicant from applying for the allocation of a fixture.5 The other is that it allows the respondent to apply for an order striking out the appeal.6 The Commissioner has applied to strike out on the ground that the appeals are hopeless.[8] The background to Mr Faloon's litigation with the Commissioner wassuccinctly set out by Associate Judge Christiansen in an earlier judgment as follows:7[9] Mr Oliver, counsel for the Commissioner advises that this proceeding is, he thinks, the twenty eighth filed by Mr Faloon in connection with events which first occurred more than 40 years ago concerning land owned by Trade Lines Limited (Trade Lines), a Faloon family company then in the control of Mr Faloon's father. Mr Faloon has prosecuted claims in thenames of corporate entities and himself in person or as a trustee of a trust which he says owned shares in those corporate entities. It is through the trust that Mr Faloon purports to obtain authority to pursue his claims as a"related entity" even though those corporate entities have long since ceasedto exist, they having many years ago been placed into liquidation.[10] The Faloon claims have been against the Bank of New Zealand, the District Land Registrar; the Palmerston North Airport Limited; the Liquidators of the Faloon family corporate entities; a lawyer who acted for those corporate entities; the Comptroller of Customers; the Attorney- General; and of course against the Commissioner of Inland Revenue.[11] In recent times Mr Faloon has endeavoured to file accounts with the Inland Revenue Department wherein he has claimed income receivable upon that sum he considers was payable by way of compensation at the time land was compulsorily acquired from Trade Lines for the purpose of an extension to the Palmerston North Airport. He considers that the sum actually paid at that time neglected to take into account other factors for which compensation ought to have been paid including a sum of $432,554 for 'noise pollution'.The ultimate purpose of this exercise is unclear. I assume if Mr Faloon canobtain the Commissioner's acceptance of a claim that income, in the form ofaccumulated unpaid interest, has continued to accrue to the sum of more than5 Rule 37(2).6 Rule 37(1).7 Faloon v Commissioner of Inland Revenue (2011) 25 NZTC 20-097.$11,000,000 now identified by Mr Faloon, then that may form some basis upon which he can pursue a new claim for further compensation.Decision[9] We agree with Mr Goosen for the Commissioner and Ronald Young J. Mr Faloon had no statutory right to reply to the Commissioner's Statement ofPosition.8 The Tax Administration Act governs the process. The order in which statements of position are exchanged depends upon which party started the dispute by issuing a Notice of Proposed Adjustment.[10] Mr Faloon purported to initiate the process. He had no right of reply to the Commissioner's Statement of Position.9 Thus there was no response period within which he was entitled to apply. The High Court had no statutory power to grant an extension of time to exercise a right which did not exist in law. Mr Faloon has noprospect of successfully appealing Ronald Young J's decision.[11] The second appeal is similarly hopeless. Katz J ordered Mr Faloon to pay costs following delivery of her earlier substantive judgment.10 The Judge dismissed two applications by Mr Faloon to stay execution of earlier judgments of the High Court following his failure to comply with an unless order.[12] In awarding costs Katz J said this:[26] Mr Faloon proceeded with the second and third stay applications despite a clear warning from Woodhouse J that his grounds for attacking the Costs Judgment were weak and that he was risking an award of indemnity costs if he continued. The second and third stay applications were, in effect,a collateral attack on Woodhouse J's judgment. Mr Faloon's aim was clearly to avoid paying the costs that had been awarded in the Commissioner'sfavour into court, as ordered by Woodhouse J in relation to the first stay application.[27] Mr Faloon must have known, or at the very least ought to have known, that the second and third stay applications were unmeritorious. Any attempts to avoid paying the disputed costs into court would almost certainly be doomed to failure in light of Woodhouse J's judgment. The pursuit of thesecond and third stay applications was therefore unreasonable in the circumstances. It caused the Commissioner to incur costs unnecessarily. I8 Faloon v Commissioner of Inland Revenue, above n 1, at [14].9 See Tax Administration Act 1994, s 89M(6)(BA).10 Faloon v Commissioner of Inland Revenue [2013] NZHC 2142.therefore conclude that r 14.6(4)(a) has been satisfied and that the Commissioner is entitled to indemnity costs.[13] In addition to our satisfaction that both appeals are without merit, we note that Mr Faloon has had ample time in which to pay security for costs. He has not given any reasons apart from his assertion in argument before us that his wallet was then empty.[14] The requirement to give security for costs exists for a good reason. Its purpose is to protect a respondent against the costs of preparing for and arguing an appeal which is unsuccessful. Mr Faloon has chosen to disregard his legal obligations. He must now live with the consequences.[15] Also, we add that, given Mr Faloon's failure to give security for both appeals,his applications for extension of time would be automatically barred: this factor in itself would operate as an absolute barrier to this Court exercising its discretion in Mr Faloon's favour.Result[16] The applicant is ordered to pay the respondent's costs as for a standardapplication for leave to appeal on a Band A basis with usual disbursements.Solicitors:Crown Law Office, Wellington for Respondent